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Criminal bank fraud charges have been filed against Michigan Supreme Court Justice Diane Hathaway. The charges were filed Jan 18 in U.S. District Court in Detroit, according to a report in The Detroit News.

The charge, related to an alleged fraudulent short sale of a home in Grosse Pointe Park, is a criminal “information” charge that is expected to get a guilty plea, according to the report.

Today, January 21, is Hathaway’s last day as a justice.

This comes on the heels of the Judicial Tenure Commission’s Jan. 7 filing of a formal complaint charging her with various counts of fraud in a short sale of her home.

In a statement released through the Supreme Court, Chief Justice Robert Young Jr. reassured the state that the remaining justices will do “what we have always strived to do: to uphold the highest ethical standards.”

“When any elected official is charged with serious misconduct, the public’s faith in its government institutions can suffer. The federal criminal fraud charges levied against Justice Hathaway and her departure from the Supreme Court bring to a close an unhappy, uncharacteristic chapter in the life of this Court. The last eight months have cast an unfortunate shadow over the Court.”

She allegedly transferred the title of two homes into the names of her stepchildren in order to help the short sale of her Grosse Pointe Park home go through, saving an estimated $600,000. Soon after, she transferred title of the two other homes back.

The JTC accused her of common law silent fraud, fraud by false pretenses, fraudulent conveyance to avoid a creditor, bank fraud under federal law, federal money laundering, tax fraud, and lying to the commission.

The FBI was/is reportedly investigating her and a federal civil lawsuit seeking forfeiture of her Florida home has been put on hold.

According to the JTC complaint, Hathaway and her husband, attorney Michael Kingsley, first contacted the mortgagor, ING Bank, about a short sale of the home in 2008, but didn’t pursue the sale at that time.

But in 2010, the couple again contacted the bank about selling the home for less than its mortgage balance, and hired the law firm Aronoff & Linnell to represent them in a prospective transaction.

During discussions with the bank about Hathaway’s financial status, her attorney, Richard Linnell, told a bank representative that Hathaway was going to retire “next year” (presumably 2011). Hathaway allegedly did nothing to refute the statement. Hathaway also told ING of a lawsuit Kingsley was involved in over an apartment building.

Hathaway was told by ING at the time that she didn’t have a financial hardship.

After receiving an offer to buy her Grosse Pointe Park home in late 2010, Hathaway submitted a short sale application to ING through Aronoff & Linnell. The documents described her financial hardships as Kingsley’s “substantially reduced income,” “serious personal issues,” having to borrow money to make the last payment, depleted savings, and an inability to afford the house.

In June 2011, ING sent Hathaway’s attorney, Steven Schulist of Aronoff & Linnell, a request for information about her and Kingsley’s interest in other properties located in Windemere, Fla., Grosse Pointe Park and Grosse Pointe Woods.

Hathaway told Schulist that she and Kingsley didn’t own the properties in Florida and Grosse Pointe Park and that Kingsley’s son, Michael Jr., owned the Grosse Pointe Woods property.

The complaint specifically alleges that Hathaway withheld from the bank that she and Kingsley “had owned” the Windemere property, which was worth $664,682 and free of any mortgages or debt, before transferring it to Hathaway’s step-daughter, Kathryn Sterr, in March 2010 for $10. Kingsley continued to pay the taxes and utilities as recently as June 2011.

Regarding the Grosse Pointe Park property, the commission said Hathaway bought the property in April 2010 for $168,000 and transferred it to Michael Kingsley Jr., in September 2010 for $100.

The commission also found that Hathaway gave the bank incorrect information about the Grosse Pointe Woods property, which was actually owned by her Sterr, instead of Michael Kingsley Jr.

Hathaway reportedly told the JTC that the Florida property was transferred to Sterr because her husband was involved in the apartment building litigation and didn’t want the property in his name.

But those weren’t all the allegations of silent misrepresentation made against Hathaway. The complaint also alleges that she failed to tell ING that she gave another stepdaughter, Sarah Kingsley, $195,000 to buy a home on Balfour Street in Grosse Pointe Park in March 2011, while the short sale was still pending.

In August 2011, ING followed up on the status of Hathaway and Kingsley’s claims of financial hardship, i.e. her allegedly pending retirement and his lawsuit. Linnell told the bank that she hadn’t retired but that “it was anticipated this would be happening in the foreseeable future,” the complaint said.

A month later, Linnell relayed that Hathaway would meet with her fellow justices and “political people” in January 2012 to discuss her plan to retire “shortly thereafter.”

In October 2011, ING approved the short sale, contingent on Hathaway and Kingsley paying $10,000 toward property taxes on the home. Schulist told the bank two days after the sale was approved that the couple planned to move into a home owned by their daughter and would pay rent.

Hathaway and Kingsley didn’t tell the bank that the house they were moving into — the one “owned by their daughter” — was the same house they gave Sarah Kingsley $195,000 to purchase just seven months earlier, the complaint alleges.

On Dec. 1, 2011, Sarah Kingsley transferred that property to Hathaway and Michael Kingsley Sr. “for less than $100.” In March 2012, Sterr transferred the Windemere property back to the couple for $10.

Gov. Rick Snyder will appoint her replacement, and there is much speculation about who he will choose. The decision might not be as quickly as you might think. MSC public information officer confirmed Monday that after the January administrative conference next week, the court has no hearings scheduled until March, giving Snyder time to make a decision. The Detroit Free Pressreports that he is taking suggestions.

“After 40 years of dedicated service to the Court, Clerk Corbin Davis has informed the Court that he would like to retire. He will remain as Clerk until the Court names his successor. Mr. Davis will continue to give the Court the benefit of his experience during the transition period, for which the Court is grateful,” explained MSC Chief Justice Robert Young Jr. in a statement released today.

The stated job requirements are these: “Juris Doctor (JD) from an accredited law school required. More than seven years practicing law, some appellate practice preferred. Active membership in the State Bar of Michigan and possession of a valid Michigan driver’s license are required.”

Of special interest but presumably not an unspoken job requirement: Every person who has ever served as Clerk of the Michigan Supreme Court has been a University of Michigan Law School graduate.

Paul Magy of Clark Hill PLC was elected president of the Building Owners and Managers Association of Metro Detroit.

Magy

BOMA is a professional trade association whose members either own or manage commercial real estate, or provide goods and services to the industry.

Magy is resident in the firm’s Birmingham office and a member of the Real Estate Practice Group. He is a former partner at Kupelian Ormond & Magy PC, which was absorbed into Clark Hill in June 2012.

Last year, Magy was awarded the International Council of Shopping Centers’ Trustees Distinguished Service Award, and he chairs the ICSC’s Michigan chapter’s Continuing Education Program for Real Estate Professionals. In May, he will be ICSC’s chairman.

In a recent opinion piece in Bloomberg News, If Judges Aren’t Politicians, What Are They?, Harvard law professor and Bloomberg columnist Cass Sunstein takes a look at the effect political ideology and partisanship has on how judges vote on cases.

Sunstein says the conventional wisdom from journalists is that judges are politicians in black robes. Other court watchers say judicial appointees routinely disappoint the presidents who appointed them. The judges view themselves as “neutral umpires” who simply follow the law.

“However incompatible, claims of this kind are often made with great conviction, as if nothing could be more obvious. But they tend to be based on vague impressions and isolated examples. In recent years, those who study federal courts have started to test these claims by analyzing many thousands of judicial votes. Armed with actual data, the researchers are finding that much of the conventional wisdom is wrong, or at least way off,” says Sunstein.

According to Sunstein, recent research shows that in “politically contested areas, such as affirmative action, gay rights, abortion, campaign-finance regulation, disability discrimination, sexual harassment and environmental protection,” there is a distinct difference in some instances:

Republican appointees have been found, over a lengthy recent period, to cast liberal votes about 40 percent of the time, whereas Democratic appointees do so about 52 percent of the time. Crucially, the law matters; a 12-point difference isn’t huge. But that difference isn’t exactly small. If you want to know how a judge will vote in a case involving affirmative action, sexual harassment or gay rights, the political party of the appointing president is a significant clue.

Judicial voting becomes a lot more ideological when judges sit on panels with two others appointed by presidents of the same political party. For example, Republican appointees side with plaintiffs complaining of disability discrimination about 29 percent of the time — but that number drops to 17 percent when they are sitting with two fellow Republican appointees. Here, then, is evidence that federal judges (no less than the rest of us) are subject to group polarization, which exists when like-minded people go to extremes.

Judges get far more moderate when they sit on panels with two other judges appointed by presidents of the other political party. When Democratic appointees sit with two Republican appointees, they vote a lot like Republican appointees. When Republican appointees sit with two Democratic appointees, they vote a lot like Democratic appointees. Here is strong evidence of a conformity effect on the federal courts.

Law firms still dreaming about the good old days from 2001 to 2007, when business was booming and double-digit profit margins were the norm, should wake up, says a recent report released by Citi Private Bank’s Law Firm Group and Hildebrandt Consulting.

“[I]t is time to let go of any lingering notion that the industry will revert to the boom years before the Great Recession anytime soon. With profit growth and other financial indices reaching lower setpoints in the past four years, we anticipate that the current state of the industry will remain the norm for the foreseeable future,” according to Citi and Hildebrant’s 2013 Client Advisory.

Firms need to adapt to the “new normal.” The report notes that overall, “average productivity since the Great Recession has been roughly 100 hours per lawyer less than in the pre-recession years.”

The report contains some frank talk about what some firms are doing about it.

“The good news is that associate productivity is approaching pre-recession levels. But this improvement is more than offset by the lower productivity levels seen among both income and equity partners. Annual billable hours per lawyer for both partner classes in the post-recession period have fallen far short of the pre-recession period.

“To exacerbate the problem, associate ranks have shrunk in recent years, while the percentage of income partners has climbed. Associates made up just 64 percent of salaried lawyers in 2011, down from 81 percent in 2001. Conversely, income partners accounted for 19 percent of salaried lawyers in 2011, up from 10 percent in 2001.

“The result is a more expensive leverage model, which can work if expenses are offset by a greater increase in revenue. In fact, a few firms have managed to do that, by composing their income partner group with senior associates and lateral hires on track to become equity partners, who tend to be highly motivated to perform.

“An up-or-out policy at these firms also keeps the income partner group from turning into a repository for less-productive lawyers.

“These firms, unfortunately, are the exception.”

Other firms saddled with income partners who are less productive than equity partners or associates have “a continuing reluctance to weed out unproductive income partners or other pockets of excess capacity, ” the report notes.

It’s been a little over a week since the Judicial Tenure Commission dropped the bomb, i.e. its report about Justice Diane Hathaway and her attempt to obtain a short sale by allegedly hiding other her other real estate properties from the bank.

In that time, not a peep has come out of the governor’s office about who will replace Hathaway when she steps aside Jan. 21.

MIRS News did a bit of speculation into potential replacements, which included many names you’d expect, like Oakland Circuit Judge Colleen O’Brien (who ran for a seat on the bench in November and lost), and several Court of Appeals judges, including Jane Markey, Kurtis Wilder, Mark Boonstra, Kirsten Frank Kelly and Christopher Murray — and one name from out of left field, Matthew Schneider, Michigan Supreme Court chief of staff and general counsel.

In discussing the COA candidates, MIRS noted that governors often like to make multiple appointments, which would suggest that one of the COA judges will likely be the pick.

There’s one problem: The next COA judge to leave his or her seat by any means other than losing an election will result in downsizing of the seat, thanks to last year’s judicial restructuring. In other words, Gov. Rick Snyder can – and might – appoint a COA judge, but he won’t get the multiple appointments out of it.

In fact, assuming that he will appoint a conservative/GOP judge to the Supreme Court, it would reduce the number of conservative judges on the Court of Appeals. While the court is considered to be widely unbalanced towards conservatives to the point that it likely wouldn’t make much of a difference, remember that Snyder appointed Boonstra and Michael Riordan to fill two open slots right before the judicial restructuring took place, ensuring the highest possible conservative lean at that level.

Would he upset that conservative lean a year later by appointing one of the aforementioned appeals court judges? Or is he more likely to appoint a circuit court judge? And if he will appoint a circuit court judge, will O’Brien be that pick?

Another consideration — and one that would not favor O’Brien — is that the Supreme Court is heavily weighted toward Southeastern Michigan. How much heavily weighted?

Five of the six remaining justices are from (or were from) the Southeast Michigan area: Chief Justice Robert Young Jr., Justices Mary Beth Kelly, Brian Zahra and Stephen Markman are from the Detroit area, and Bridget McCormack is from the Ann Arbor area, which isn’t Detroit but sure isn’t Grand Rapids either. Justice Michael Cavanagh is from Lansing.

Why would this matter? To some on the west side of the state, it does. Recall that in 2010, when former Justice Elizabeth Weaver stepped down rather than run for re-election, one of her conditions supposedly was that then Gov. Jennifer Granholm would appoint someone from northern Michigan to finish her term. Weaver is from Traverse City. Granholm appointed Alton Thomas Davis, from Grayling, to fill Weaver’s seat.

Until Snyder makes his choice, we can only speculate: will it be one of the conservative Court of Appeals judges getting the bump, reducing the number of judges on that court? Will it be O’Brien, or perhaps a circuit judge from Western Michigan? Or will it be Schneider, a truly in-house selection?

By this time next week, we should know.

ADDENDUM: Perhaps the language of the restructuring statutes would allow Snyder to appoint a replacement after all. A reader emailed to offer an alternative interpretation, one that might allow Snyder to replace a COA judge.

The two sections that apply towards the Court of Appeals seem to contradict each other. The first section MCL 600.303a(b) states:

If there are more than 6 court of appeals judgeships in a district on the effective date of the amendatory act that added this section and 1 of those judgeships is vacant, that judgeship is eliminated.

Would this apply? It would depend on whether the phrase “on the effective date” only applies to whether there were any openings on the date the law went into effect or if any vacancies were created on a later date.

Otherwise, the next subsection, MCL 600.303a(c), would apply. That subsection only eliminates a judgeship in the event that an incumbent or appointed judge doesn’t run for reelection.

I still think the potential COA opening would be eliminated, but it’s certainly food for thought.

Not sure if he was planning to drink it all in one place, but Andrew Furlo of Saginaw Township apparently thought he could get away with more than 100 2-liters of pop from a Walmart.

On top of that, he fled the scene by carjacking his getaway driver.

According to Mlive, on Oct. 24, 2012, Furlo packed a shopping cart with 2-liters and pushed the cart near the store’s exit. He then bought a few 2-liters, placed those on top of the rest of bottles, and exited the store, pushing the cart to a vehicle waiting outside for him.

When he went back for a refill, Walmart’s loss prevention staff stopped him. Furlo ran, threw the getaway driver out of the car, and sped off.

Furlo reached a plea deal Jan. 2 with Saginaw County on unarmed robbery, and prosecutors said they will drop the carjacking charge.

He could have gotten a maximum penalty of 15 years in prison for unarmed robbery, while the carjacking charge carries a maximum penalty of life in prison. Whatever the case, Furlo will probably do more prison time: he was on probation for third-degree fleeing from a police officer at the time of the incident.

Barry Goodman, co-founder and senior partner of Southfield-based Goodman Acker PC, was recently elected by the Democratic State Central Committee to a seat on the Democratic National Committee.

Goodman will serve in his role with the DNC for a four-year term. He is one of 447 DNC delegates nationally, and one of only seven elected members in Michigan

“I am honored to be serving on the DNC, and contributing my time, expertise and passion to making a positive difference in the country’s political landscape,” Goodman said. “I have devoted my career to the preservation of the civil justice system, which includes working in the political arena to place like-minded thinkers into the appropriate positions of power.”

Both Goodman and his partner, Gerald Acker, have a history of political volunteerism, including their roles on the National Finance Committee for President Barack Obama’s election campaigns in 2008 and 2012.

Today, for the first time since February 22, 2006, Thomas spoke actual words during oral arguments, uttering “Well, he did not …” according to the official transcript. [The Associated Press via NY Times.]

So what was so important that Thomas broke his moratorium on speaking during oral argument? Everyone’s favorite pastime … making fun of lawyers! Even if the court reporter didn’t get his entire joke.

Some eyewitnesses told the AP that Thomas was making fun of lawyers from Yale, his alma mater. Others said it was Harvard lawyers that were getting the raspberry. Either way, I’m sure it was a ripsnorter.

Thomas hadn’t spoken in so long, he’s explained, because people do to much talking in oral arguments.

“I don’t see where that advances anything,” Thomas told The Washington Post in 2012. “Maybe it’s the Southerner in me. Maybe it’s the introvert in me, I don’t know. I think that when somebody’s talking, somebody ought to listen.”

EF Hutton never said it better.

Thomas told C-SPAN in 2009 that oral arguments are “an opportunity for the advocate … to fill in the blanks, to make their case. I think you should allow people to complete their answers and their thought, and to continue their conversation. I find that coherence that you get from a conversation far more helpful than the rapid-fire questions.”

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